World Trade Organisation (WTO)

By: EconomyWatch   Date: 29 June 2010

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The World Trade Organization (WTO) was founded in 1995 by the members of the General Agreement on Tariffs and Trade (GATT). The WTO is the world’s only international organization that supervises 95% of the world’s global trade. It assists trade related issues of its member nations that produce, export and import goods and services in a smooth manner. Comprising 153 member nations, the agreements pertaining to the WTO have been signed and confirmed by respective member nations.

The predecessor of WTO is General Agreement on Tariffs and Trade (GATT). WTO is an International body dealing with the rules of trade among states and separate customs territories. The agreements in WTO provide the legal ground-rules for international trade and commerce. They are mainly contracts, binding governments to conduct their trade and trade policies according to principles and rules. Although negotiated and signed by governments, the goal is to help producers of goods and services, exporters and importers over the Globe and bringing them under one roof.

The International body has over 148 members as on October 13,2004 accounting for 90% of the world trade and around 30 others are negotiating membership and are WTO observers.

Members of the WTO include:

  • All of North America

  • All of South America

  • Most of Europe, Australia Southeast Asia, sub-Saharan Africa and the south Pacific regions
  • Why was WTO established?

    The WTO was founded with the purpose of liberalizing international trade. Its aim was to help member nations reach cordial solutions to their trade-related problems.

    The main principles of WTO are:

    • To promote fair competition

    • To encourage economic and development reforms

    • To increase predictability through transparency

    • To lower trade barriers for freer trade

    • To ensure fair treatment to locals and foreigners

    Objectives of the WTO

    With manifold objectives like helping trade flow smoothly, freely, fairly and predictably it has become capable of organizing trade and commerce over the Globe through the mantra of liberalization, privatization and globalization. It is stepping forward with objectives like:

    1) Rejecting all forms of protectionism.

    2) Removing trade barriers and eliminating discriminatory treatment in international trade through successive multilateral trade negotiations.

    3) Providing a fair, predictable and open rule-based trading system through overseeing the implementation of multilateral trade rules and enforcing legally binding obligations.

    4) Providing a mechanism for settling trade disputes.

    5) Integrates developing and least developed economies into the world trading system.

    How the WTO Works

    All important decisions are made by the Ministerial Committee which meets every two years. Trade disputes are resolved by the WTO through negotiations. In case any nation puts up trade barriers in the guise of customs duty against another country or for a specific good, the WTO can issue trade related sanctions against the violating country.

    Two basic functions of the WTO are:

    • To confirm whether the agreements that have been covered are implemented, administrated and executed effectively.

    • To settle negotiations and disputes by providing a forum check.

    The activities of WTO are managed by a Ministerial Conference that is held once in two years.

    Structure of the WTO

    WTO is run by its member nations. Decisions are taken by consensus among entire member nations.

    The WTO's top-level decision-making body is the ministerial conference, which meets at least once in every two years.

    Below this is the general council (normally represented by ambassadors and heads of delegation in Geneva, but sometimes officials sent from members' capitals), which meets several times a year in Geneva. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body.

    At the next level there are three Councils each handling a different broad area of trade - the Council for Trade in Goods (Goods Council), the Council for Trade in Services (Services Council), and the Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council).

    There are also specialized committees, working groups and working parties dealing with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements. They regularly report to the General Council, Goods Council and Services Council as appropriate.

    The WTO secretariat in Geneva has around 600 staffs and is headed by a director general. The WTO Secretariat's main duties are to provide administrative support for the running of the system.

    Achievements of WTO

    The WTO has several achievements as listed below:

    • Enhanced the value and quantity of trade.

    • Eradicated trade and non trade barriers.

    • Broadened the trade governance scope to trade in investment, services and intellectual property.

    • Emerged as a greater institution than GATT.

    • Expanded the WTO agenda by including developmental policies.

    • Eased settlement of disputes by enforcing improved rules.

    • Improved monitoring by introducing the Trade Policy Review and the World Trade Report

    • Increased transparency by removing green room negotiations

    • Encouraged sustainable trade development


    Challenges Ahead for WTO

    The WTO faces considerable challenges as listed below:

    • Decision-making within the organization.

    • Streamline reforms related to its dispute settlement system.

    • Implement development-oriented policies in an effective manner.

    • Facilitate global trade liberalization in agriculture and textiles.

    • Encourage Non Governmental Organizations or NGOs to become an important part of world trade governance.

    • Devise ways to increase staff and resources to ensure effective regulation.

    In the years 2008 and 2009, the WTO witnessed increased economic uncertainty. Its main function is to ensure the smooth and free flow of global trade. The WTO continues to administer agreements, handle trade disputes and monitors country-specific trade policies while training and cooperating with developing nations and other international organizations.

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